Business is where you find it

Pretoria (SA) – Zendaleather SA MD Mario Magnin’s job might be taxing, but it’s at least clear cut. His instructions are “to keep this operation stable, and try to grow it each year for the next 3 to 4 years”.

“Hopefully that means I’ll be here for the next 4 years,” he adds, drily. “Probably I will stay longer.”

The company, which was originally set up here early 2000 as a subsidiary of Uruguayan group Branaa, but which – as of July 31 this year – is now 100% owned by Brazilian group Marfrig, has been rebuilding since he arrived early last year.

“Zenda was doing a good amount of leather a month, all for automotive OEMs, with over than 700 people,” he said. “Then business dropped, and there was a significant retrenchment.

“Over the past 18 months, we’ve built back up again to good volumes, with just 550 people. We’re running about 10 000 hides a week divided between auto, furniture, aftermarket and footwear.

“We’ve been able to get the business by diversifying and offering a broader range of leather to a broader group of customers, and we’ve been able to increase productivity by reorganising the factory. One of the aims on that is the team work build during this period.

“This isn’t a simple operation – in terms of product, we have 3 businesses – top-, medium- and low-grade leather – and in terms of markets, we have, potentially, 5 – OEMs, aviation, furniture, aftermarket and footwear. On top of that, we’re part of a diversified multinational. To fill this plant and to grow, we’re investigating all of these options.

“Marfrig is restructuring its global marketing team, so that there will be 3 global marketing managers, responsible for automotive, furniture and aviation, and footwear. Tanneries like this one then become production plants for all of these divisions.

“It’s accurate to say that we’re looking for business, and the group is looking for business for us.”

He said automotive leather for German OEMs “remains the core business for us, which is more than important and we should search for new options to keep us busy and ensure a stable work for all our people”.

Furniture leather is new, and it’s for local customers, and it absorbs many of the hides which aren’t up to German OEM standards. Currently, Zenda is supplying major SA furniture manufacturers. “We’re also talking to SAA about making leather for aircraft seats,” he said.

“We’re doing good business with some overseas furniture and aftermarket customers in China, and increasingly in Thailand and Indonesia, where a lot of leather business is moving from China because it’s now trying to sort out its environmental problems.

“We don’t know how big the aftermarket actually is, internationally, but it’s substantial,” he said. “It also probably has fewer technical requirements than the OEMs because it doesn’t have to offer the same warranties.”

There are also other OEM options. “The Korean brands, Kia and Hyundai, are producing very good vehicles, and there’s more demand for leather from them. At the economy end of the market, the Chinese car brand Cherry and the Indian car brand Tata both take quantities of leather.”

Marfrig is a heavyweight in global terms. Essentially a farming and meat producing company with a leather subsidiary, it’s the third biggest meat producer in the world, slaughtering 25 000 cattle/day.

“We have the option to buy their hides, and over the past 14 months we’ve been able to select hides from South America. Despite the group’s vast resources, Zenda SA imports only 20%-30% of its wet blue. The rest is mainly from local suppliers.

“At the end of the day, you need the hides and the grades and the price that fit your business. We’ve been considering many different options, and some of them will be in place a year from now.”

Noting changes to the structure of the industry, he said: “20 years ago there were many more tanneries than there are now, and there were far fewer chemical suppliers, with far fewer chemicals, which were still enough to make leather.

“Now leather is a fashion product, and there are hundreds of suppliers, offering thousands of chemicals.

“Leather car upholstery and leather furniture are both luxury and fashion products. Trying to capture additional market share through, for example, making more varied colours, is not an easy way.

“The other difference is that previously business came to you – now you have to go and find it. But I like to think positively, and to be proactive. Zendaleather has improved its situation in a year. I think the growth the group wants is achievable.” – [Tel: +27 (0)12 810 3500, email: Mario.magnin@zendaleather.com]